Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $210. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars.

Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per unit

The market equilibrium quantity is_7 units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could Impose a of per unit of electric cars. Show Transcribed TextUse the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per unit. 540 O Social Cost 480 420 360 300 Supply PRICE (Dollars per unit of electric cars) (Private Cost) 240 180 O Demand 120 (Private Value) 2 5 QUANTITY (Units of electric cars)